Walmart is extremely focused on winning these days. During the post-earnings call with investors, CEO Doug McMillion mentioned the world’s largest retailer’s commitment to being the best and beating all comers.
“Overall, we’re in it to win it,” McMillion noted toward the end of his remarks as he finished off listing Walmart’s myriad accomplishments in Q3.
And, as has been Walmart’s pattern in 2016, there is a fair amount to crow about. For the third quarter in a row Walmart has beaten analysts’ predictions on revenue and marked same-store sales increases (a difficult magic trick in retail these days) — and in Q3 the company also had some more than solid growth in eCommerce lines and on the global scene.
But investors were less than thrilled by all those green arrows — as they were accompanied by an uncomfortably red arrow in the profitability tally — and share prices have taken a hit, down around 2.9 percent in pre-market trading.
So what’s the need to know in all that information?
By The Numbers
Walmart managed to beat on earnings again in Q3, noting $0.98 a share, $0.02 more than the Wall Street consensus, according to Bloomberg. Sales, however, were a bit of a miss, though they increased. Walmart brought in sales of $118.18 billion, an 0.7 percent increase over the prior year period, but below the Thomson Reuters forecast of $118.7 billion.
Comparable-store sales were up by 1.2 percent — which again was a slight miss of the 1.3 forecast for the quarter. Traffic was on the increase, up 0.7 percent, a fact McMillion credited Walmart’s staff with.
The biggest numerical miss was in profit, which was down 8.2 percent. That big bite comes as Walmart is investing big in infrastructure, store modernization and eCommerce enhancements. Those improvements — although necessary to achieve Walmart’s vision of being the and most reliable retailer in the world, according to McMillion — have also cost the retailer billions of dollars. Most notably and recently that included the $3 billion acquisition of Jet.com.
But that investment is already showing signs of bearing fruit — as Walmart’s eCommerce results in Q3 were striking — and greatly picked up on the pace of anemic eCommerce growth in the year’s prior two quarters. Digital sales popped up 20.6 percent (excluding currency swings). That figure, comprising an assist from Jet.com, was included in the quarter for six weeks.
All in all, eCommerce sales added 0.5 percent to the U.S. same-store sales figure, “our largest contribution yet,” McMillon noted.
“We’re executing well in our stores and making strategic investments in eCommerce to accelerate growth,” he added.
In It To Win It
Though Walmart’s less-than-expected haul cause investors some heartburn, the figures hit about 24 hours after rival Target announced same-store sales with falling traffic (although with sincere hopes that the situation would be flipped during the upcoming holiday).
Charlie O’Shea, lead retail analyst at Moody’s, thinks that Walmart could also have a killer Christmas if the company can leverage its store network to handle online orders, especially via its buy-online/pick-up-in-store capability, as well as increasing benefits from Jet.com.
McMillon also noted that Walmart isn’t just growing eCommerce, it is building it out right, with a partner in Jet.com that fully understands and supports Walmart’s commitment to “basket economics.”
“When customers build a bigger basket online, everybody actually wins — and the system functions better for everyone,” he said.
Walmart very much wants to win. And against its physical world peers, it is well positioned — as earnings have tumbled out this week, brick-and-mortar players (particularly department and box stores) have been rolling out results that are not exactly stellar. If that is the race, Walmart is well ahead of the game.
But Walmart’s real race is with the future — and a shopping base that is moving ever more online. The competition is there with Amazon, the retail upstart that stole Walmart’s market cap crown a year or two ago.
Walmart wants that crown back — and is willing to sacrifice an awful lot of money and effort to get there.
It should be a holiday season well worth watching.